Massive interbank lending squeeze going on in China

The Central Bank more or less decided that it couldn't keep expanding the money supply, which was increasing at dangerously high rates(which hasn't really began to bleed into real goods yet), and it has more or less abruptly decided to discontinue giving spot money to banks on easy terms, further signalling no reductions in short term interest rates anytime soon.

I think the Everbright bank situation, and the proliferation of wealth management products (which are used to evade scrutiny on loans) prompted this.

As a result, and this has been going on for the past few months, actually, many commodities and other items are being sold below cost. Such as iron and iron products.

I get the feeling that there will be a good chance to pick up good pu at reasonable prices towards the fall, if this spirals further, past mid July or so. Maybe not 1997 or 2008 good, but something reasonable.

Do you believe any potential drop in prices will only (or more significantly) affect older teas (ie per-2007 or so)? My thinking is that since the prices have risen sharply in the past few years, I wouldn't expect vendors/sellers to sell these newer teas below what they paid (and take a loss). Would this be a fair assumption in your opinion?

Pu market is based on hard cash , there is no such things like long term credits there, there are many other factors playing role in price regulation of the tea. Pu market is highly volatile because of high rank speculators and trader . There is huge amount of tea already purchased for high prices and big guys will do whatever possible to avoid price drops. If demand is still there , don't expect Christmas in middle of the summer .

I do not expect any hard falls in old tea, whatever that may be. Best we're gonna get would be late '90s, early 2k teas. We're talking about teas hoarded in personal warehouses, costing speculators storage money as their ability to pay the bills are threatened. We're not talking about people selling their personal collections, as in 1997, or people not going to the mountains and buying old tree maocha for a resulting cheaper price in 2008.

Probably large corporations expected that, so that dayi would price a plantation tea or a shu over 400rmb. Then later on, if the price drops below 200rmb, people would be happy. If there is another financial earthquake, I suspect dayi would only benefit from it in various aspects.

I suspected a few small tea companies that I like started dying from 2 years ago. They have to pay high prices for raw materials, but don't have the capability to sell their products for as high prices as large companies.

Some other good small companies are either backed up with big money and aim at rich people (foreigners count as rich people, so companies like dou ji advanced to Korean market), or have very conservative style (low price for good tea but their tea is only available for a few months). I think companies of these styles are survivors (the first type, if their financial support lasts before they grow big).

Hmmm, looking at the Donghe graphs, shu is stable, a few minor shengs are stable, old classics from before 2007 are stable. However, young, rather dynamically priced sheng have had some volatility. 901 Yiwu, Golden Age, Jin Dayi, etc. It seems to be dropping from late May highs, of about 20% by June tenth.

shah82 wrote:Hmmm, looking at the Donghe graphs, shu is stable, a few minor shengs are stable, old classics from before 2007 are stable. However, young, rather dynamically priced sheng have had some volatility. 901 Yiwu, Golden Age, Jin Dayi, etc. It seems to be dropping from late May highs, of about 20% by June tenth.